Innovation in Environmentally Sound Technologies:Update on Recent Empirical Work

Presentation by

Nick Johnstone and Ivan HascicEmpirical Policy Analysis Unit, ENV/EEI

www.oecd.org/env/cpe/firms/innovation (Nick.Johnstone@oecd.org)

ETAP Conference on Technology Transfer: Creating Partnerships for Stimulating Economic Renewal

April 3rd 2009, Berlin

OECD Project*• Develop indicators of EST innovation to be

included in OECDSTAT – alongside indicators of nanotech, biotech and ICT

• Develop indicators of EST technology transfer and internationalisation of innovation (co-invention and knowledge spillovers)

• Analyse the determinants of EST innovation and international transfer empirically using econometric techniques

* Financial support from DG ENV, UK DEFRA, DE BMU, CH BUWAL, NL VROM gratefully acknowledged.

Areas Covered by Project• Air pollution control (stationary and mobile)• Water and wastewater treatment• Solid waste management, recycling and prevention• Noise control• Monitoring technologies• Renewable energy• ‘Clean’ coal (i.e. IGCC, CCS, FBC)• Fuel cells• Building and lighting energy efficiency• Hybrid/electric vehicles• Green chemistry • etc...

Structure of Talk

• Preliminary results on determinants of EST innovation:– Air pollution, water and wastewater, solid waste– Climate change mitigation technologies

• Preliminary results on determinants of EST transfer– Air pollution, water and wastewater, solid waste– Climate change mitigation technologies

Environmental Policy Design Characteristics• Stringency – how constraining is the environmental

policy target• Uncertainty – does the measure provide a consistent

(foreseeable, transparent & credible) signal to investors

• Flexibility – does it let the innovator figure out the best way to meet the objective

• Depth – are there incentives to innovate throughout the range of potential objectives

• Incidence – is the point of incidence of the policy directly on the externality or is it on a ‘proxy’ for the pollutant

• Legal status – is compliance with the policy mandatory or voluntary

General ‘Environmental’ Technologies(Number of patent applications - claimed priorities, worldwide)

Stability and Transparency of Environmental Policy Regimes (Mean value of the index over 2001-2006)

Survey question: Environmental policies in your country are 1 = confusing and frequently changing, 7 = transparent and stable.

Source: http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm

Policy Stability and Innovation

Policy Stability / Stringency and Innovation (Negative binomial regression with country fixed effects)

Dependent variable: PATENTS_AWW Coef.

Policy Stability (WEF_STAB) 1.3964*

(0.033)

Pollution Abatement and Control Expenditures (PACE_Private) 0.3052**

(0.002)

Government Expenditures on Environmental R&D (GBAORD_env) 12.6307**

(0.005)

Gross Domestic Expenditures on R&D (GERD_total) 0.1240

(0.208)

Total Patents (PATENTS_EPO_totals) 0.0162***

(0.000)

Intercept -4.669

(0.177)

Hybrid, Electric and Fuel Cell Vehicle Technologies(EPO 1980-2004, Country Shares)

Electricity Generation Innovations(Claimed priorities by inventor country, normalised by total patents)

Flexibility of Environmental Policy Regimes(Mean value of the index over 2001-2003)

Survey question: Environmental policies in your country are with 1 = offer no options for achieving compliance, 7 = are flexible and offer many options for achieving compliance.

Source: http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm

Renewable Energy Technologies(Number of EPO patent applications, 3-year moving average)

Note: Geothermal, Ocean, and Biomass/Waste are shown on the right axis.

Policy Instrument Choice and Innovation(Negative binomial regression with country fixed effects)

Wind Solar Geothermal OceanBiomass& Waste

All Renewables

Electricity Price 0.651 14.699*** -7.204 0.049 -5.244 4.029

(0.884) (0.000) (0.442) (0.997) (0.332) (0.136)

Growth of Electricity Cons. -0.034 0.013 0.035 -0.060 0.015 -0.012

(0.227) (0.459) (0.359) (0.135) (0.649) (0.354)

TOTAL EPO Filings 0.131*** 0.100*** -0.033 0.015 -0.005 0.050***

(0.000) (0.000) (0.286) (0.781) (0.764) (0.000)

Specific R&D Expenditures 19.846*** 4.219*** 2.955 13.835* -1.485 1.186***

(0.000) (0.000) (0.094) (0.032) (0.729) (0.000)

Feed-in Tariff levels 0.035 0.042*** 0.061 0.142 -0.065 0.087***

(0.115) (0.000) (0.512) (0.226) (0.064) (0.000)

REC targets 0.575*** 0.122 19.961 0.278** 0.047 0.344***

(0.000) (0.126) (0.050) (0.004) (0.713) (0.000)

Other Renewable Policies 0.123 0.256* 0.543 0.964* 0.657** 0.270**

(0.426) (0.033) (0.138) (0.017) (0.002) (0.003)

N 429 418 227 130 359 474

Log-likelihood -614.17 -810.90 -226.56 -132.52 -409.66 -1049.73

Chi-squared 443.95 1702.17 150.83 141.36 277.83 7416.24

(Prob > chi2) 0.00 0.00 0.00 0.00 0.00 0.00

P-values in parentheses, based on robust standard errors. * p<0.05, ** p<0.01, *** p<0.001

Oil Price and Inventive Activity in the Electricity Supply Industry: Renewables and Fossil Fuel Efficiency

Downstream Effects of InnovationKnowledge Stock and Energy Efficiency in Fossil-Fuel Power Plants

International Transfer of Air Pollution Technologies

International Transfer of Water Pollution Technologies

International Transfer of Solid Waste Management Technologies

Policy Flexibility and Technology Transfer

Corr (‘Exports’, Flex)=0.45 Corr (‘Imports’, Flex)=0.26

Policy Flexibility and Transfer(Negative binomial regression)

Dependent variable: AWWTTijt

using FLEXjt using FLEXj_avg

t=2001-03 t=1998-06 t=2001-06

(1) (2) (3) (4)Policy Flexibility (FLEXit or FLEXi_avg) 1.3657*** 0.2204 2.1638*** 0.5966***

(0.000) (0.102) (0.000) (0.000)Policy Flexibility (FLEXjt or FLEXj_avg) 1.0634*** 0.6256*** 1.4522*** 1.1998***

(0.000) (0.000) (0.000) (0.000)Policy Stringency (STRNGit) 0.8262*** 0.6698***

(0.000) (0.000)Policy Stringency (STRNGjt) 0.3354*** 0.1202*

(0.000) (0.047)

Available Stock of Inventions (AWWSTOCKit) 0.0004*** 0.0003*** 0.0003*** 0.0003***

(0.000) (0.000) (0.000) (0.000)Absorptive Capacity (AWWPATjt) 0.0012*** 0.0012*** 0.0011*** 0.0011***

(0.000) (0.000) (0.000) (0.000)Total Technology Transfer (TOTALTTijt) 0.0042*** 0.0026*** 0.0044*** 0.0028***

(0.000) (0.000) (0.000) (0.000)Intercept -13.2789*** -12.1151*** -18.6560*** -14.7467***

(0.000) (0.000) (0.000) (0.000)

N 21822 21822 90900 37200Log pseudolikelihood -5757.94 -5548.51 -15888.29 -8035.44

(Prob > Chi2) 0.000 0.000 0.000 0.000

P-values in parentheses, based on robust standard errors. * p<0.05, ** p<0.01, *** p<0.001

International Transfer of IGCC – CCS Technologies

International Transfer of Wind Power Technologies

International Transfer of Solar PV Technologies

Climate Change Policies and Transfer(Negative binomial regression, with fixed effects)

Dependent variable: CCTT_ijt

i = Annex1j = non-Annex1 with DNAst=post-2000

Degree of Involvement in CDM Projects (CDM_ijt) 3.97E-07*(0.050)

Absorptive Capacity (CCPAT_jt) 2.40E-03***(0.000)

Available Stock of Inventions (ASTOCK_it) 6.41E-04***(0.000)

Electricity Consumption (CONS_jt) 2.16E-06***(0.000)

Total Technology Transfer (TOTALTT_ijt) 8.38E-04(0.136)

Intercept -6.5121***(0.000)

N 8440

Log pseudolikelihood -509.47(Prob > Chi2) 0.000

Next Steps

• Finalisation of EST-innovation indicator(s) (ENV-tech) – to be included in OECDSTAT

• Further empirical analysis of determinants of EST innovation in different areas (e.g. ‘green’ chemistry, motor vehicles, climate change backstop technologies)

• Further empirical analysis of determinants of transfer of EST technologies

• Linking innovation data with micro-data (Orbis/Amadeus, CIS, PRTRs) to analyse economic and environmental effects of EST innovation